For those of us in the roofing business, it’s hard to escape the fact that residential construction is a flawed business model. A home can take six to nine months (or more) to construct — and that’s before it’s even sold to a customer. During that time, there can be anywhere from 25 to 35 different trades that are sequenced together to build a home — starting with the subdivision of land and creation of the infrastructure to serve that home all the way through the finishing work of installing appliances. Each of these milestones requires specialized tradecraft, which need to pay for labor and materials long before the home is brought to market.
To add to the challenge, traditional lenders have drastically reduced their exposure to the industry since the 2008 financial and mortgage crisis. Today’s construction firms are limited to asset-backed lending and financing that covers only a portion of their accounts receivable. Many of them are extending supplier payment terms as a way to cover this gap in financing — forced to finance their growth on the backs of their vendors.